Stein Mart Plans Aggressive 2006

Stein Mart is striding into a new fiscal year ready to embark on its largest batch of new store openings in five years, an upgrade of its store transaction systems, and a revamped home department that focuses on fashion and shies away from promotions.

During its year-end and fourth-quarter conference call last week, the $1.5 billion off-price chain offered details on its new initiatives, leading off with new stores.

The plan to open 20 new stores, said president and ceo Michael Fisher, is a “response to the enhanced performance we're seeing in new stores opened under our more rigorous site selection process.”

The chain now has 261 units. Most new stores will be in its traditional southern markets of Texas, Florida, North and South Carolina, as well as the Midwest and Northeast. One new market is Queens, N.Y.

Another major initiative, which he said “will begin to have real traction in the back-half of the year,” is the reset of the home area, which will get “dramatic new assortments in the fall and some specific additions for holiday.” The reformat is nearly complete in all units. So far, the best performing categories are fashion top-of-bed, furniture, art, some ceramic pieces, floral, seasonal and garden décor.

Fisher said the bath shop is not “performing to the extent we would wish it,” and because of the move away from promotional goods, utility bedding – “which used to be a big part of our business, a part that we used to drive promotionally,” he explained – has been poor because of reduced inventories.

“We've dramatically reduced inventory there because we're focusing on the fashion side of the textiles business, not the promotional side,” he said. “The move away from that has had an impact on sales as well. But it remains a work in progress. We're seeing some good signs and we're getting some positive indicators from the customers, but we are going to continue to tune this business until we get it right and we've got a very receptive team in place to do that.”

In terms of percent of sales by category, in 2005 home represented about 15%, “significantly down from where we believe the penetration should be,” Fisher said, and from where Stein Mart's home category historically operates, which has been between 16% and 18%.

Because of the trend toward better, more fashion-forward merchandise in home, Fisher said the average unit price is higher for the category.

Stein Mart retains many of its core vendor partnerships for home, but he said new vendors' products are being tested.

Other changes for this new fiscal year include the elimination of the children's apparel business, beginning in the second quarter, to make room for additional categories of ready-to-wear and intimate apparel.

Remodeling includes installing new transaction software and hardware at stores, upgrading the front-end capabilities and providing a more flexible platform for future enhancements.

“The stores that are outfitted with this equipment will receive makeovers to their front-of-store environment to provide a more flexible selling presentation layout and some will also receive a refreshed décor package. Over the course of the last two years, those stores that have received the new interior décor have seen increases at approximately 5% in their comp business,” Fisher said.

Fisher said the company expects the first half of 2006 to be “less robust than last year” as it continues to fine-tune its assortments, “and the investments we are making will benefit our customers and our stockholders in the near future. We are confident that our decision to add new stores, upgrade technology, refine our merchandise mix and stay closer to our customers through research and marketing will provide fuel for future and further progress down the road.”